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Sustainability in government procurement sector

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  • 1. Insights series Sustainability - WorldwideSustainability in Government Procurement SectorOverviewOne of the effects of the financial slowdown is that the governments as a procurer of large scale ofgoods and services are noticed more and seen a long-lasting source of business and income.Government spendings have always been significant – just that there is now a renewed focus ongovernment as a buyer of goods and services. The governments worldwide, at least in the developedcountries are trying to transform sustainable ideals into concrete laws, policies and strategies. Withthis background, the PPPs (Public Private Partnerships) will gain a competitive edge for bidding andwinning by offering something more than just meeting minimum sustainability requirements.EuropeEurope will soon have thorough legislative requirements for sustainability that will raise the bar onsustainability requirements for major PPPs. The European Commissions 2008 voluntary instrument,Green Public Procurement (GPP), targets having clear and ambitious environmental criteria forprocurement of products and services across the EU member states.Since correct nomenclature and boundary setting is essential, the European Commissiondistinguishes:Green public procurement as being where public authorities seek to procure goods and services withthe aim of reducing environmental impact through the life-cycle of the goods or services; andSustainable public procurement as being where public authorities seek to achieve the appropriatebalance between the three pillars of sustainable development - economic, social and environmental- when procuring goods, services or works at all stages of a project.The GPP recommends setting common environmental criteria for the whole European community.Once such common environmental criteria are adopted, they are likely to have a follow-on effect inenvironmental requirements around the world. As providers in Europe are required to meet thesestandards when tendering for government projects, other government bodies around the world arelikely to be influenced to adopt similar standards and the private sector is likely to be driven todevelop greener technologies and products.
  • 2. Insights series Sustainability - WorldwideFormulate minimum technical specifications for such a policy is a complex and elaborate task.Difficulties include insufficient information on lifecycle costs of products, poor awareness of thebenefits of environmentally friendly products and services and a lack of political support.The objectives of the program, however, are not unachievable and provide some guidance for boththose who set tenders and those who tender for PPPs when considering minimum environmentalrequirements.Changes in the UKUK shows an increasing emphasis on sustainable public procurement and the incorporation ofenvironmental and sustainability criteria in PPPs. In the 2008 publication, "Strategy for SustainableConstruction", the UK Government clarified its aim to procure more sustainable properties andinfrastructure, achieve greater use of design quality assessment tools to ensure that buildings,infrastructure and public spaces are fit for purpose, resource efficient, sustainable and resilient, aswell as utilise the construction industrys capacity to innovate and increase the sustainability of boththe construction processes and the resultant assets.Recent changes that are noticeably shaping tender requirements in the UK include:1. changes to what is required of public bodies and the buildings that house them;2. bespoke accreditation processes (such as BREEAM) which are tied to Kyoto protocol-related legislation (similar to Australias Green Star and NABERS rating systems);3. revised building regulations requiring new buildings to meet minimum sustainability requirements; and4. guidance from Treasury to public bodies on how to negotiate changes in service agreements to enable existing PPP projects to meet rolling legislative demands around climate change.
  • 3. Insights series Sustainability - WorldwideNew South Wales (Australia)In September 2010, the NSW Government recently updated its Guidelines for Economic Appraisal –under which the economic appraisals of new public infrastructure by Government agencies shouldnow explicitly include an evaluation of climate change. Climate change considerations in sucheconomic appraisals would include the estimated benefits (expressed as damages avoided)compared with the cost of asset adaptation for new and existing assets, where adaptation refers toadjustments in response to actual or anticipated climate changes or their effects. The new guidelinesemphasise that climate change uncertainty should be explicitly acknowledged and built intodecision-making processes in connection with the procurement of new infrastructure. Tenderers canexpect that their bids will also need to specifically consider climate change.In some of the upcoming developments, PPP bids are also likely to be required to address social andenvironmental considerations more fully in project objectives at the commencement of PPPcontracts and reflect these considerations in project specifications and monitoring of outcomes.Various government agencies have started taking sustainability targets for themselves. For example -the Transport Construction Authority (formerly TIDC) in already in the process of setting short,medium and long term sustainability targets. One of TCAs long term targets is to ensure that thecost-benefit analysis process used at the project feasibility stage considers whole-of-life costs andmakes adequate provision for community benefit and sustainability ("Sustainability Targets"publication (2009)). These are now likely to pass on to the bidders targeting business from theseagencies.Only costs?Sustainability requirements are forming a greater part of tendering, not only as a reaction tolegislative and policy changes, but also as a reaction to the environment around us. Real project risksrelating to the environment, for example, climate (extended and unpredictable dry and wet periods)and weather (severe storms, flooding) and the market (carbon trading, rise and fall of costs ofnatural resources) are transforming because of the changing nature of the planet. These risks arenow being considered during the bid phase in greater depth - public bodies are requiring moredefinition and risk allocation on such risks that were previously simply "acts of God" or "changes inlaw". The private sector will need to consider how to address these risks.
  • 4. Insights series Sustainability - WorldwideHolistically, since construction industry depends on both numerous natural resources and the builtenvironment itself to support it, building sustainable projects, not only will the environment benefitbut also the construction industry itself.These significant changes to legislation, policies and strategies are strong indicators of the change indirection of the public sector to build more sustainable projects. The follow-on effect will be thatthose in the private sector tendering to build these projects will need to meet these ever-increasingrequirements. Gearing up for these changes will definitely allow companies to respond to more andmore stringent guidelines that may come up soon. It will therefore be a strategic more of thecompany to invest in preparing itself for such processes.Linking to profitabilityUntil tougher sustainability requirements become minimum requirements in tenderingdocumentation and/or legislation, bidders need only comply with what is set as the minimum.However, to stand out from other bidders, investing in sustainable options analysis could generategood returns in the long run.Some of the approaches could be using alternative costing approaches in line with the identifiedsustainable targets such as climate change waste minimisation use of materials from sustainable resources energy and water use integrated supply methods, or a project carbon footprint.These alternatives could give a bidder an advantage where the tender prescribes minimum or "niceto have" sustainability requirements. Even if such alternatives are not put to use first time around,the investment in sustainable thinking now will reap disproportionate rewards in the long term.
  • 5. Insights series Sustainability - WorldwideSummaryChange towards building more sustainable projects is well underway with government agenciesalready beginning to include their own tough sustainability requirements in tenders. However, thesedemands are only in their infancy. The private sector will be well served by anticipating where thesustainability market is heading and being innovative with green ideas when bidding for PPPs. Theleading edge is no longer just about the best technology, best skills, best experience or best price butalso about whats best for a sustainable future.About usAgneya Carbon Ventures came into existence with the purpose of “To help our clients inunderstanding, establishing sound Environment Management Systems, and pursuing sustainablebusiness solutions through our various services to abate direct and indirect impact on ecologicalbalance.”We have expertise in the areas of carbon accounting and management, energy managementsystems, voluntary/compliance carbon markets, environment management and sustainability andcarbon branding.We have worked with companies across Private, Government and non-Government sectors enablingthem to create carbon accounting, monitoring and reporting systems.We have undergone training in the area of sustainability reporting in the GRI framework of reportingsustainability.To know more about us, please visit http://www.agenya.inTo schedule a meeting or a discussion with us, do reach us onKedar - +91-9665407848 – kedar@agneya.inIndrajeet - +91-9028788430 – indrajeet@agneya.inReferenceshttp://www.lexology.com/library/document.ashx?g=affb6adb-b210-4899-9551-4941217ac831#page=1